Dan Haar: We had growth in spring but economic picture remains mixed

Durable goods manufacturing was a key driver of economic growth in Connecticut and many other states in the second quarter of 2018. That includes defense spending at Sikorsky Aircraft, shown here in a 2015 file photo when Lockheed bought the helicopter-maker from United Technologies Corp.

Durable goods manufacturing was a key driver of economic growth in Connecticut and many other states in the second quarter of 2018. That includes defense spending at Sikorsky Aircraft, shown here in a 2015 file

Durable goods manufacturing was a key driver of economic growth in Connecticut and many other states in the second quarter of 2018. That includes defense spending at Sikorsky Aircraft, shown here in a 2015 file photo when Lockheed bought the helicopter-maker from United Technologies Corp.

Durable goods manufacturing was a key driver of economic growth in Connecticut and many other states in the second quarter of 2018. That includes defense spending at Sikorsky Aircraft, shown here in a 2015 file

Connecticut’s economy grew at an annual rate of 3.1 percent in the spring, the federal government reported Wednesday in a release that shows, once again, mixed news for the state’s stop-and-start recovery.

The growth rate, while robust compared with recent years and quarters, places Connecticut at No. 43 among states in an extraordinary 2018 second quarter for growth nationwide. Worse, a comprehensive revision of prior numbers shows that in 2017, Connecticut’s economy shrank by 1.1 percent, not 0.2 percent as had been reported.

That’s largely because in the fourth quarter of 2017, the state’s economy shrank at a 2.4 percent annual rate — a change from a previously reported quarter of solid growth.

For 2018, through the first six months, Connecticut is on pace for modest growth, which at least is an improvement. The first-quarter figure was an annual rate of 1.1 percent.

The revisions show that from 2007 to 2017, Connecticut’s economy shrank by an astounding 8.5 percent while the nation grew by 15 percent. Those numbers are slightly changed from previously reported totals that included a 9.1 percent drop for the state — but that’s hardly any solace.

The question, of course, is what all this means for the state’s fiscal and jobs pictures under Gov.-elect Ned Lamont. And there, the picture is also mixed.

State budget offices reported late Tuesday that tax collections are up in 2018 enough to raise the forecast for revenue in 2019 and 2020 — meaning the projected shortfalls of $2 billion in the next fiscal year, and $2.4 billion in 2020-21, are now smaller by hundreds of millions of dollars.

So we have smaller deficits and decent growth, but we still have large deficits and a legacy of decline.

On the jobs front, with a state report due out Thursday, Connecticut is on track for a gain of 1 percent, or about 16,000 jobs in 2018. That’s subject to large revisions in March, but if it holds, 2018 could bring the largest year of job gains since 2007 and the first significant gain since 2015.

Economist Donald L. Klepper-Smith of DataCore Partners took a dour view of the data in a note to clients Wednesday, saying, “the reasons as to ‘why’ Connecticut has lagged in economic terms is a function [of] declining business confidence, rising out-migration, a lack of fiscal discipline at the state and local level, and misguided economic development policies.”

It’s worth adding that the state lacks a large, magnet city of the sort that has clearly driven growth in other parts of the country, notably Massachusetts and Texas.

In the second quarter reported Wednesday, New England grew at an annual rate of 3.7 percent. The fastest-growing region was the southwest, led by a hot Texas at 6 percent.

The figures reported are annualized, meaning they are roughly 4 times the actual three-month growth, adjusted for inflation. Connecticut’s gain in the spring quarter was 0.8 percent after adjusting for inflation. The total state economy will comprise about $270 billion in activity this year.

Durable goods manufacturing drove 0.41 percentage points of the 3.1 percent annualized gain in Connecticut, and information industries contributed 0.7 percentage points — both sectors on par with the region and the nation. Finance and insurance contributed a decline of 0.42 percentage points, on par with New England but a steeper decline than in the nation, which still showed a decline for those sectors.